Would add 676 new positions if Congress approves Obama's $245M budget boost
Most of the hiring the Securities and Exchange Commission would do if it gets the budget increase it's seeking would bolster its examination staff, SEC Chairman Mary Schapiro told members of Congress today.
In testimony before the House Appropriations Subcommittee on Financial Services, Ms. Schapiro said that the commission would add about 676 total positions if Congress approves the Obama administration's request for a $245 million boost to its current $1.321 billion budget.
Of those new hires, 222 would be examiners. It's not clear how many of them would do investment adviser exams.
Strengthening oversight of the more than 35,000 firms it monitors is one of the agency's top priorities, Ms. Schapiro told lawmakers.
“The funding level would allow the commission to enhance its investor protection activities by bolstering enforcement and examination programs, and continuously developing analytical models to identify regulated entities with high-risk profiles,” she said.
The agency examines about 8% of the 11,700 registered investment advisers under its purview each year. That number is due to decline this year when midsize advisers switch to state oversight.
“We are already examining, in my view, far too little of our regulated entities on an annual basis,” Ms. Schapiro said. “These numbers would be further strained, if our budget is cut.”
In a Washington dominated by concerns about the burgeoning budget deficit, the SEC has fared pretty well.
For instance, the agency received a $136 million increase for the current fiscal year. That was $86 million less than the Obama administration had requested, but much better than a funding cut. Most of the 400 new positions added this year were in the Division of Trading and Markets, according to Ms. Schapiro.
Asking for another increase didn't go over well with Republicans on the committee.
“Most agencies haven't received increases like y'all — nowhere close,” said Rep. Jo Ann Emerson, R-Mo., chairwoman of the appropriations subcommittee.
Like most of her Republican colleagues, Ms. Emerson is looking for management improvements before Congress allocates more funding to the SEC. Among other things, she criticized the SEC for failing to stop the multibillion-dollar Ponzi scheme perpetrated by Bernard Madoff and the accusations of fraud against Allen Stanford.
“This body is reticent to throw more money at the SEC until y'all have proven that you've addressed your structural problems from within in a comprehensive way,” Ms. Emerson said.
Ms. Schapiro emphasized that the agency's spending is financed by the fees it charges for securities transactions rather than by taxpayer funds — although Congress does set its spending limits. She also stressed that the agency needs a larger budget in order to fund the technology required to keep pace with increasingly complex financial markets and products.
Ms. Schapiro also touted what she called “significant improvements” in SEC operations. She noted that the agency filed a record 735 enforcement actions in 2011, although one lawmaker disputed that number, saying that some of them were cases carried over from previous years.
Later in the day, the SEC received more congressional pressure over how it allocates its resources.
“The SEC needs to be a better steward of the substantial funding it receives,” stated a report that the House Financial Services Committee was expected to forward to the House Budget Committee.
“The SEC continues to spend time and resources on nonmandatory rulemakings, such as the imposition of a fiduciarylike standard of care for broker-dealers,” according to the report, which reflects the views of the panel's Republican majority. “The committee continues to believe the SEC could better protect investors and prevent Madoff-like fraud by using its resources to conduct more examinations of registered investment advisers.”
